Banking, Money and Finance : Live Well Financial: Getting a Reverse Mortgage Online: Dos and Don’ts

(Prudent Press Agency)--- Looking for a company that handles reverse mortgages online is easy, just type in “reverse mortgages” in your search engine and the results that will come back to you are quite staggering. However, looking for a good reverse mortgage company online, such as livewellfinancial.com is quite a challenge, and there are many pitfalls that you should avoid at all costs.

Here is a list of dos and don’ts that can help you both find a very good and reliable reverse mortgage company, and at the same time avoid those thieves and scammers just trolling around cyberspace, looking to make a quick buck. True, these are sound, basic advice, but you’d be surprised just how many people can forget these things in the face of a really good deal.

DO: Scout around and canvass

Like when buying a car or looking for a good school for your kids, you won’t just get the first one that comes by. These are big decisions in life, and getting a reverse mortgage is also a big financial decision. You should look around the Internet, ask your local Better Business Bureau, or simply ask friends and family whether they can refer someone to you. Online, if a website has a lot of referrals and testimonials, like Live Well Financial, this can be a very good sign, however, it won’t hurt to still be a little careful with whom you do business with.

DO: Get all the needed information first

You never charge into a war without a loaded gun, and so you should never get into a reverse mortgage contract before making sure that you know what you need and what you’re getting into. Thieves and crooks will often use your ignorance to slip one over you, whether it is an unnecessary charge or consultation, so it’s best to come prepared.

Livewellfinancial.com will not only give you the basic information that you need free on their website, but should you have any other questions, you can either contact their customer support team online, or get a free financial counseling session from them.

DON’T: Give away sensitive information on the Internet

There are two pitfalls that you have to avoid when giving out sensitive information on the Internet, such as complete name, addresses, SSS numbers, credit card numbers and the like. Reputable company would never ask those kinds of information online, as there are a lot of hackers and cyber thieves out there who are great at extracting this kind of information, even if the data is encrypted and secure. Also, companies that ask for this kinds of information can be quite dicey, because there are times when they are really just hackers looking to make a quick buck off your credit card number.

Livewellfinancial.com is a site that requires you to become on-premises when you get a reverse mortgage to give your sensitive information. This is to ensure a quick and secure transaction between you and the company.

DON’T: Sign anything that you don’t understand completely

A lot of reverse mortgage companies employ a really old trick in the book. Use a lot of complicated jargon and terms to confuse the client, and then slip in a clause or two about very high fees, interest rates and other such things. Don’t ever put your signature on a contract that has even one part that you don’t understand, and always, always, always read the fine print.

Livewellfinancial.com offers you a service that is direct-to-the-point and very easy to understand, so that you know what you’re getting into, and what you’re going to get.

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Your money: Pensions, savings bonds, mortgages

With government playing a bigger role in the economy, it's hard to keep track of all the changes affecting our personal financial lives. The flagging economy has lead to a barrage of questions. Are public sector employee pensions safe? With inflation so low, do savings bonds make sense now? And what about reverse mortgages, are they a smart move now that new rules are in place? AP personal finance writers tackle those questions in this installment of "Your Money." If you have a question you want answered, e-mail it to yourmoney(at)ap.org.

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Q: When a pension goes bankrupt, I know there's a government guarantee on the obligations. How about when a government entity runs out of money, however, as my state and city are starting to do? If they can't fund their obligations, does someone else step in to pick up the check?

A: For public sector workers, there's no pension backstop comparable to the Pension Benefit Guaranty Corp., the federal agency that steps in when private plans can't meet obligations. Public pension sponsors — say, state or city governments — have contractual obligations to keep pensions fully funded.

That may be of little comfort when many local and state governments are stretched thin, such as California, which is struggling to close a $26 billion deficit. However, public pensions have a stellar record. Robert Klausner, a pension law attorney and counsel to the National Conference on Public Employee Retirement Systems, said he's unaware of any public pension failing to meet its obligations since the 1930s. In the case of Orange County, California's bankruptcy in 1994, retirees received full pension benefits throughout the financial crisis, Klausner said.

Public pensions have proved more durable than private plans in part because governments have the flexibility to make up for pension shortfalls by raising taxes — an option corporate pension sponsors lack. Klausner also said independent actuaries review the nation's 2,700 public pension plans to ensure they can meet obligations. In instances when a government failed to contribute enough to keep a pension fund healthy, legal challenges have succeeded in restoring full funding, Klausner said.

— Mark Jewell

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Q: Do savings bonds make more or less sense in an economy like this one, where interest rates and inflation are low? What about when inflation rises?

A: Savings bonds make sense for the investor who doesn't need much cash flow and wants safety. But they're not particularly attractive right now if you're looking to make a savvy investment for the long term.

A Series EE bond purchased between now and the end of October earns just 0.7 percent per year for as long as you hold it. The exception would be if you hold the bond for 20 years, in which case the value is guaranteed to double. In that instance you'd be assured a return of 3.5 percent. But if you're investing for that long a timeframe, you should probably aim higher.

You could also purchase Series I savings bonds, which have some inflation protection. But if you buy one now you'll earn nothing for inflation for as long as you hold the bond, due to the fact the inflation rate is currently below zero. This will be a better investment as inflation rises.

Depending on your time horizon, other alternatives to consider are high-yield savings accounts, CDs or Treasury Inflation Protected Securities (TIPS), advises Greg McBride of bankrate.com.

— Dave Carpenter

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Q: I understand there were some changes in the reverse mortgage program recently. What were they and who do they help?

A: As part of stimulus legislation signed by President Obama in February, the loan limit on reverse mortgages was temporarily raised to $625,500 from $417,000, subject to renewal by Congress at the end of the year. That helps senior homeowners (reverse mortgages are for homeowners age 62 and older) who have homes with higher values.

Under other changes in the past year, reverse mortgages can now be used on a condominium and, for the first time, to purchase a new home.

Eric Bachman, founder of Oakland, Calif.-based Golden Gateway Financial, says the changes make reverse mortgages even more compelling for older Americans interested in downsizing or moving to another location. It also means, he says, that seniors in financial distress or those simply planning ahead can put more of their home equity to work for them because of the higher loan limits.

Some other changes this year aren't perceived as so consumer-friendly.

Fannie Mae, the government-backed mortgage company, made changes in April that allow for higher margins for reverse mortgage lenders. Margins are the interest rate spreads a lender makes on the loan, so higher margins mean higher interest rates. Also, the margin can change from the time a borrower submits an application and the loan is funded, which can be up to 120 days.

— Dave Carpenter

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Mortgage Rates, Opportunity "Locks"

Ads about Mortgage Rates are everywhere. You cannot go onto your computer without seeing ads from several different lenders and the television is full of ads touting their mortgage rates or the fact that rates are way down.

Yet, there are still borrowers who are sitting on the fence, hoping that they will come down just that last little bit so that they can time the market just right. Whether it is for bragging rights or for the lowest of all possible payments, people sometimes seem to think that there is always a better rate coming.

Mortgage rates are a bit different than some of the other interest rates about which consumers see news articles. Just yesterday, there were articles all over the news about the possibility of “negative rates”. The rate they were discussing was for the Federal Funds Rate, commonly referred to as the Fed Funds Rate.

The Fed Funds Rate (that is the short term rate charged to member banks and depository institutions for overnight borrowing) is not the rate that individual borrowers get for their mortgage loans, cars, etc. The idea of lowering the Fed Funds Rate is that if the cost of borrowing goes down then the cost of credit from the banks to the consumers will also decrease.

The United States Central Bank has hinted that they may buy as much as another $100 Billion in Treasuries. The Fed already has the go ahead to purchase $1 Trillion worth of mortgage-backed securities and $200 Billion of the debt secured by Fannie Mae and Freddie Mac.

What does all this mean for the mortgage rates that homeowners have to pay? It really depends on the economists you listen to! The Taylor rule (named after the economist who devised the formula) states that the key interest rate to revive and stimulate the economy should go down to negative ½%. Travel around the net a while though and you’ll find several economists who say that this is a recipe for disaster, just inviting inflation which will certainly drive borrower’s rates up.

No one can ever time the mortgage rates perfectly all the time. Even the long time pros who have been in the industry for decades have been caught when a massive market move came, sometimes to such a great detriment that it wiped companies out. Mortgage rates are driven more by the sales of the bonds in the secondary market than by what the Fed Funds Rate does on any given day.

Those bonds can become extremely attractive during times when the stock market is suffering and people look for a safe haven, or they can become extremely unattractive if there is a large offering of bonds in the marketplace, there are no buyers, and rates must rise quickly to make the bonds more palatable to potential buyers. In other words, mortgage rates can move quickly, up or down, and often for reasons for which no one was prepared.

Everyone knows to watch for when jobless claims come out, GDP numbers, Housing Starts, Retail Sales and other tell tale signs of a growing or contracting economy. However, in today’s environment, a terrorist attack around the world, the White House announcing a new program which is either widely accepted as good or bad, or any number of other unexpected items can cause a shock wave to the entire system, sending rates shooting up or down. Sometimes the move is very temporary and sometimes it can take a while to reverse these sudden changes.

If you are one of the many watching the mortgage rates and trying to time it just right to either buy or refinance your home, then you may want to consider this: rates are extremely low. Whenever I get the question of what will rates do in the future, I always answer the same way,

“There is only one sure answer for that question, it is certain that they will do one of three things – they will go up, go down or stay the same”. No one is ever right all the time on rates and I have seen all too many people who were trying to time it just right watch as the rates took off and suddenly they were too high for them to benefit any more or they missed their opportunity to buy.

My advice is to decide where it makes sense to you to do a loan and then when it meets your needs, lock and close it – then never look back. That way you won’t be one of the ones who “had a chance to buy or lower your payment, but got caught sitting on the fence and missed your chance when the rates shot up”.

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More seniors sign for reverse mortgages

More senior Australians are taking out reverse mortgages to pay down debt and secure an income in retirement, a study finds.

Reverse mortgages, whereby outright home owners borrow against the equity in their homes, were launched in Australia earlier this decade and are sold primarily through financial planners and brokers.

Chief executive of the Senior Australians Equity Release Association of Lenders (SEQUAL) Kevin Conlon said the funding of reverse mortgages was becoming more challenging given financial market conditions.

However, SEQUAL was backed by the major banks and non-bank lenders that were well placed to meet the funding demands for the sector, he said.

The $2.5 billion market posted a 23 per cent in the number of reverse mortgages nationwide last calendar year to 37,500, said Deloitte Actuaries and Consultants.

Lump sum payments accounted for 97 per cent of drawdowns, with settlements reaching $141 million in 2008, Deloitte said.

The average reverse mortgage size is now $66,000, although that average rises to $74,300 for single women.

Couples account for almost half of all new loans, with the average age of borrowers 74 years, Deloitte said.

Deloittes spokesman James Hickey said debt repayment, home improvement and retirement income continued to be the top reasons for seniors taking out a reverse mortgage.

Buying a car was the next most common reason, followed by the need for funds to pay for aged-care services.

Fixed rate loans comprised 28 per cent of all settlements in the first half of calendar 2008 and dropped to 10 per cent by December 2008.

The past 12 months had seen a decline in the number of borrowers seeking a fixed rate mortgage in line with lower interest rates.

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Equity conversion

WASHINGTON (MarketWatch) -- Question: I have many questions regarding the Home Equity Conversion Mortgage. How much down payment is required? Is there really no verification of income or assets? Do we have to sell our current house first (it is currently listed for sale)? Would it be possible to find a condo in a retirement development in Southern California that would be approved under this program?
Answer: You are referring to the new Home equity Conversion Mortgage for Purchase program, which was authorized by Congress in the Housing and Economic Recovery Act of 2008 that took effect Jan. 1.

The program, which is aimed largely at persons 62 years or older who want to move down the housing ladder, allows seniors to sell their current residence and use a reverse mortgage to buy a new one, all in a single transaction that eliminates the need for a second set of expensive closing costs. HECM's are insured by the Federal Housing Administration.
According to Monte Howard, affinity marketing director at Atlanta-based Generation Mortgage, the down payment on the new residence is based on three factors:

1.
The youngest purchaser's age. The older the buyer, says Howard, the smaller the down payment.
2.
Prevailing interest rates. The lower the rate, the smaller the down payment on a reverse mortgage that comes with a fixed rate that never changes over the life of the loan. But adjustable-rate reverse loans "have a special rate factor" called "the expected rate" that is used in the down payment calculation, Howard reports.
3.
Value. Lenders use either the property's sale price or appraised value, whichever is less, to determine the loan amount, which is then used to determine the down payment. But for properties valued above the current FHA HECM lending limit of $625,000, you'll have to come up with more cash, for every dollar in value above the limit will add a dollar to the down payment.

According to Howard, neither a purchaser's income nor credit score are factors in qualifying for a HECM. "A prior bankruptcy, for example, would not affect a prospective purchaser's ability to qualify as long as it is not a current, unresolved proceeding," he says.
But there is limited asset verification. Purchasers must demonstrate that they have the required down payment and that the money has not been borrowed. Financial gifts appear to be acceptable under certain guidelines intended to confirm that the funds are truly a gift, not an undocumented loan.
Howard also says that purchasers are not required to sell their current home prior to the closing of their reverse mortgage purchase. But they must occupy their new home within 60 days of closing. Purchasers can retain their current home as a rental property as long as they are capable of meeting the financial obligations of maintaining both homes.
And as for your final question, any condo that meets FHA requirements can be purchased through the HECM reverse mortgage program.
Q: I am 68 years old and have owned my home for 28 years. I am now in the process of refinancing to take advantage of a lower interest rate. Does the HECM include the refinancing of existing mortgages or is it for new purchases only?
A: Eric Bachman, chief executive officer at Oakland, Calif.-based Golden Gateway Financial, says most HECMs are used by seniors who want to remain in their homes. They work best when you own your home sans mortgage, or at least almost free and clear.
But you can use them to replace your current financing. And depending on your age, the property's value and what you still owe, a reverse mortgage could be a good way to generate additional income.
"If you still hold a forward mortgage on your property, a reverse mortgage can help eliminate your remaining debt while potentially creating additional funds that can be drawn as a lump sum or a monthly payment over time," Bachman says.
Based on the little bit of information you provided in your question, the reverse mortgage expert thinks that because of your relatively young age, a tenure payment "might be the best option."
A tenure payment is a monthly payment to you from the lender -- hence the name "reverse" mortgage -- for as long as you own your home. Better yet, because a HECM is a no-recourse loan, once it comes due you are protected from ever owing more than the fair market value of the home at the time of its sale.

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How Much Money Can I Get?

The amount of funds you are eligible to receive for reverse mortgages depends on your age (or the age of the youngest spouse in the case of couples), the appraised home value, interest rates, and in the case of the government program, the lending limit in your area. In general, the older you are and the more valuable your home (and the less you owe on your home), the more money you can get.